Why are some MNCs exiting the Indian market?

The growing presence of domestic players in various sectors may be behind the diminishing role of MNCs

Over the past decade or so, major MNCs, including household names like Ford, have either left India or significantly downsized their businesses, with German wholesaler Metro becoming the latest to join the list.

Metro, which entered India nearly two decades ago, is selling its local business to Reliance Industries, a decision which it says has been taken to "keep pace" with the "intensive transformation" taking place in the Indian market.

"We have chosen an alternative that opens a new chapter for Metro India. Metro is divesting Metro India to a strong partner who will be able to give the Indian business long-term economic and technological prospects," Metro's global CEO Steffen Greubel told employees.

These concerns, however, aren't unique to Metro India and are among several factors that have precipitated the exits of major MNCs from India over the past decade, according to a report by The Times of India.

French wholesaler, Carrefour, for example, shut its wholesale outlets in India eight years ago, an exit that analysts say was driven by low margins in the B2B, wholesale segment.

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"Retail in India is increasingly getting consolidated in favour of much larger players like Reliance," Abneesh Roy of Nuvama Group told the publication, adding that this shift in the sector is also affecting kirana stores which are losing market shares to e-commerce, quick commerce, and modern trade players.

The growing presence of domestic players in various sectors is also behind the diminishing role of MNCs.

For instance, India's consumer mobile services business is completely dominated by domestic players, while sectors like the cement industry have also moved in that directon, especially after Holcim's sale of its India cement units to Adani.

"The exit of large MNCs is part of their business and commercial reasons and not [due to] regulatory and legal requirements in India," Lalit Kumar of J Sagar Associates told the publication.

"Carrefour, Walmart, and now Metro have exited India for different reasons, but it's a fact that countries like India are outliers. While Walmart suddenly went in for a pregnant pause in expansions, and that led to a bit of stagnation, Carrefour wanted to be a pure retailer but it began in cash-and-carry, which did not fit in with the global plan, and, therefore, it didn't work out for them either. So their models in India did not conform with the global model, and that's a key reason why MNCs have exited," an industry expert explained.